This document provides describes Apple’s business model, its competitive forces, challenges and the strategy. Apple is chosen because of its product offering in the mobile and cloud computing. Apple has a long history of successes and failures. During the course of its existence it has transformed itself from a desktop-top manufacturer to mobile platform company. Its flagship product has changed from a personal computer to a smart device. It has always been strong in the consumer market. Should Apple see the enterprise market as the next step as an integral part of its growth strategy and is it ready for it.
1.1 Common Business Model
Apple has only 14 physical products between their personal devices, smart phones, laptops and desktop computers. In addition, it has a cloud based eco-system that supports creation, sharing and selling of applications and content.
Apple has been operating as a manufacturing company using both direct and indirect manufacturing where they own the exclusive rights to the product and the manufacturing process.
1.1.2 Razor and Blades
Apple partially uses this model where consumers can buy the personal devices or get the cloud platform subscriptions. Software, peripherals, content creation and sharing has purchased later.
1.1.3 Retail and Catalog Consignment
In addition to its online business, Apple has recently launched retail stores for its direct product sales and service.
1.1.4 Cloud Computing and SaaS
Apple uses cloud based computing for its media file sharing, storage and learning platform. Apple iCloud can be used to store and synch content on the cloud. An example of the Apple product can be content manager and iTunesU used as an online learning environment.
1.2 Financial Model
Apple is ranked number 1 company in US for the last 5 years. It surpassed Microsoft as the biggest company in terms of revenue and market capitalization. Apple is a publically traded as NASDAQ: APPL. Apple has revenue in upwards of 600 Billion and cash reserves of 70 Billion. Apple’s market capitalization is around 618 Billion, which is more than twice, compared to the next two technology companies Microsoft and Google.
Apple’s revenue mix is growing for their smart devices compared to the portables and desktops. Gartner reported that its worldwide sales of mobile phones declined in the first quarter of 2012.
Apple’s growth chart is moving upward since the two spikes due IBM’s introduction of personal computers in 1980 and Steve Jobs ousting along with Microsoft’s bailout in 1997.
1.3 Operational Model
Apple has a six building campus located at 1 Infinity Loop, Cupertino, CA and a second one under construction in the same area. Apple has upwards of 50,000 employees. It has partnerships with various manufacturing partners in Asia.
Operationally Apple is organized as a single profit and loss center. Steve Jobs did not think it was synergy but the ability to run as one giant unit as a unified team. So the whole company can focus on fewer things and shift gears quickly to grab an opportunity.
Many companies including Microsoft will look for extra revenue and evaluate on a spreadsheet and then figure out what to make where as Apple thinks of a great idea and wants to build a prototype.
1.4 Marketing Model
1.4.1 Best performing Retail Stores
Apple is primarily a product and services company. It has recently started to sell through the retail channel by opening 350+ stores internationally. The retail store carries 14 products only and customized specialized services for the user of those products. Apple has the highest retail revenue per unit of real estate compared to any other company.
1.4.2 Multi-networked Cloud based Eco-System
Apple services offering is a set of cloud-based services in the form of iTunes, App-store and iBook store. The eco-system present behind each of these clouds is enormous and offers a lot of possibilities. Users have opportunity to participate in extending the experience through applications, content creation, sharing and authoring books. Apple makes money off of this multi-sided network by selling computers, smart phones/devices online and through retail stores. Apple also has revenue share model if the user is making money on the mobile, web or cloud platform.
1.5 Competitive Model
Apple has a unique competitive model. It is profitable not because it was the first to introduce a new technology or it has the best of the bread. It benefits hugely by the level of quality of feature rich devices that has a lot of attraction for its product in the consumer market. In addition it is making it appealing to the consumers because of its large follower ship who are either interacting using the clouds or enhancing the product using iBooks and application development.
2. Competitive Forces and Challenges
Apple competes with PC manufactures for its Personal Computing products. In addition to this smart phone companies such as Android and windows mobile manufactures. Cloud based offerings for file share. Sharing music using iTunes is similar some of the other Internet based sites offered in the past. Apples offer becomes unique with the creation courses and its content using iTunesU. This can be seen as a learning management system in its infancy.
2.1 The Rivalry of Competitor
Apple competes with windows based PC manufacturers. At the same time Apple is in the smart phone and device market. It is also competing with companies providing cloud-based services.
2.2 The Threat of New Entrants
Apple expects competition from companies that are already in the market with smart phone and device offerings. It has to watch for the followership for people who not only use the product but also use the product as the base to sell products and application. Mobile platforms such as Android and Windows mobile are either gaining market share or big companies such Google and Microsoft putting a lot resources to improve their market share.
2.3 The Threat of Substitutes
Disruptive technologies (or more generally, disruptive innovations) initially appeal to a small market niche, but evolve to become major competitors, changing the market and affecting the value proposition for the technology they displace. Even dominant companies with little competition are susceptible to substitutes, especially ones based on disruptive technologies. The possibility that a different but related product may substitute for a company’s product, e.g., disposable diapers as a substitute for cloth diapers; ballpoint pens with refills as a substitute for quill pens and ink.
2.4 The Bargaining Power of Buyers
Apple uses its cash hoard to pay for the construction cost (or a significant fraction of it) of the factory in exchange for exclusive rights to the output production of the factory for a set period of time (maybe 6 – 36 months), and then for a discounted rate afterwards. This yields two advantages:
Eventually its competitors catch up in component production technology, but by then Apple has their arrangement in place whereby it can source those parts at a lower cost due to the discounted rate they have negotiated with the (now) most-experienced and skilled provider of those parts. Provider has the opportunity to bring the cost production costs down and potentially subsidized by its competitors buying those same parts
2.5 The Bargaining Power of Suppliers
Apple recently had to take Samsung to court for intellectual property violations.
3. Competitive Strategies
3.1 Position-Based Approach
Apple is perceived as the innovation company for the products it is selling today.
3.2 Advantage-Based Approach
Apple is perceived as way advanced in the innovative technology and thus has an upper edge over its competitors. Apple has long-term relationships with all its manufactures. By virtue of thus Apple owns the manufacturing process and technology. It has recently won a case against Samsung for patent infringement. Apple is not just crushing its rivals through superiority in design, Steve Jobs’ deep experience in hardware mass production (early Apple, NeXT) has been brought to bear in creating an unrivaled exclusive supply chain of advanced technology literally years ahead of anyone else on the planet.
3.3 Relationship-Based Approach
Apple has access to new component technology months or years before its rivals. This allows it to release groundbreaking products that are actually impossible to duplicate. Remember how for up to a year or so after the introduction of the iPhone, none of the would-be iPhone clones could even get a capacitive touchscreen to work as well as the iPhone’s?
It wasn’t just the software – Apple simply has access to new components earlier, before anyone else in the world can gain access to it in mass quantities to make a consumer device. One extraordinary example of this is the aluminum machining technology used to make Apple’s laptops – this remains a trade secret that Apple continues to have exclusive access to and allows them to make laptops with unsurpassed strength and lightness.
Once those technologies and their mass production techniques become sufficiently commoditized, Apple is then able to compete effectively on cost and undercut rivals. It’s a myth that Apple only makes premium products. Once the product line is no longer premium, they are produced more cheaply than competitor equivalents, yielding higher margins, more cash, which results in more ability to continue the cycle.
3.4 Model-Based Approach
3.4.1 Growth Chronology
220.127.116.11 Growth through the establishment of a strong desktop publishing platform
Apple started as a Simple Point-of-Sale (POS) Systems – Purchase of a product/service as a simple transaction when it offered its desktop platform.
18.104.22.168 Growth from expanding the volume and type of market in the consumer and educational market.
Transformed as a Compound Point-of Sale Systems – Any Apple purchase is an opportunity for the company to make money on its hardware, Software, maintenance and cloud services.
22.214.171.124 Introduction of Next platform technology to form the basis of mobile device platform.
Next Computers Inc. did not sell more than 50 thousand units. Yet the technologies incorporated in Next computers formed the based of the mobile platform. Now Apple is selling more than 50 thousand units an hour.
126.96.36.199 Two-sided Market Systems – A system where the organization has two revenue sources and the price of one has an impact of the demand for the second.
Introduction of strong cloud based distribution and marketing offering
188.8.131.52 The next step can be to start selling Apple as a platform.
3.5 Decision-Based Approach
As mention earlier in this article, Apple is a single entity. Steve Job’s management style was to conduct weekly meeting and a series of meetings for the elite 100. Perception of insiders was that 90% of the employees knew what the company focus was at a particular time.
3.6 The next disruption for Apple
Apple has a strong presence in the consumer market for all its products. Should it worry about the completion in the consumer market or is it necessary for Apple to woe the enterprise customers. Where will the next moment come from?
3.6.1 An existing competitor – Mobile platforms
Android-based devices may have surpassed iOS based on the number form early this year. Number of applications that run on Andorid platform is 600,000 as opposed to 650,000 on Apple’s iPhone/iPad devices. Microsoft may not be selling that many applications but it has a strong integration between its TV, Web, Web and Mobile platform.
3.6.2 A supplier – iPad Manufacturers
Samsung and other vendors have desires to be in the same market as Apple
3.6.3 A start-up – Gets bought out
Startups may not have the muscle to out Rank Apple with its strong research, time to market history, ability to react and deep pockets.
3.6.4 From outside the industry – Enterprise
A company such as Google and Microsoft who are already a competition in the consumer market may be the biggest competition especially if they have a complete solution to allure the enterprise customer. Microsoft already has a strong presence in the enterprise world but may not have strong offering for its mobile platform.
4. Business Model Evolution
Apple is a strong mobile platform with a extremely effective cloud based distribution system. Other mobile application development platforms have an application eco system with varied levels of maturity. Their cloud based distribution mechanism may or may not be comparable with Apple’s. Their overall cloud strategy is getting a lot of focus on technology offering and integration capabilities with other company-supported platforms. If we are to have the premise, that unified, cohesive technology approach taken by various companies in terms of bringing the deployed and development platform for web, mobile and TV together is a strategic advantage, then how do we compare Apple with the competition?
Latest version of Apples mobile development for iOS 6 is integrating a lot of platforms including social networking, collaboration type functionalities. Strategically we can compare it with other development suite in terms of developer follower-ship and technology integration. For instance Microsoft’s development environment is integrated into its mobile, web and cloud platforms. These platforms may be more relevant for the Enterprises as opposed to the consumers.
Enterprise governance work s with entitlement and authorization based mechanisms. From the governance perspective we can create an institution wide branded presence through iTunesU and iBookstore. The branded environment should then allow for departments, programs and affiliations based sub-branding. The governance model is well suited if maintained at a central level, but administration of content is maintained at various distributed levels.
Extensibility beyond Apple platform may be key for integrating Apple line of products and for adaptation by the enterprise. Apple’s development and distribution provisioning environment works well, but it does not allow for multiple levels of ownership. An entity level relationship is needed to maintain and preserve the publishing rights using the entity’s name, but distribution rights for developed applications can lie with the application owners. Also from a development perspective Apples distribution strategy using the App-store is designed for native apple (Xcode based development), but it does not support third party development environments in terms of development and distributed provisioning rights.
Consumers are less inclined to learn the technology. For example iBook author is a great mechanism to publish content. Key strength of the authoring system is through using widgets. Widgets can be extended using common web technologies. Content producers may not always know and be willing to learn web technologies. Content producers should only have to worry about the content. IBook authors may not be the native adaptors of the iBook Author tools’ extensibility mechanism.
5. Best IT-Supported Proposal
Given the premise from abstract that mobile and cloud computing are technologies of the future. Also Apple has a strong offer in mobile computing and a relatively less mature cloud compared to Amazon, Google and Microsoft.
The company that is in a position to integrate its cloud and mobile offering with the existing application infrastructure might have a better chance for growth in the enterprise environment.
An enterprise with strong mobile and cloud integrations to pre-existing infrastructure may be most compelling criteria for evaluation. Is apple’s mobile/cloud based offer a fit for an up and coming enterprise?
Apple has a strong cloud based distribution system within iTunes including collaboration tools and extensibility mechanisms for application and content creation. The collaboration tools can be used for lecture capture, course planning, delivery and recording. Apple has tools for video conferencing and group participation as well as a solution for TV integration. Does apple have cloud platform beyond iTunes.
Even universities as an example are turning into an enterprise-like environment. An environment with heavy reliance on Active-Directory based computing-element management, push mechanism for policies along with an exchange-based foundation for collaboration, communications and event notification is already in place.
A cloud-based service is already in use for all users for most enterprises. Each user has a choice of some cloud based email service such as Gmail or a Microsoft live account. These accounts provide an instant access to Google docs or Microsoft 360 live. A complete cloud-based solution may not just be based on a service but as a platform that could accommodate platform centric integrations of the environment.
Learning management system for instance is the authenticated, authorized platform to create collaborative learning environments. Tests, Quizzes and evaluations are the core of any LMS. Challenge based learning is the premise for all learning environments of the future. Learning environment of the future may have loosely coupled integrations for lecture capture, tele-presence and collaboration tools.
For instance iBooks can be used to write books, tests, case competitions, presentations and much more. Widgets can be used to make the iBooks the best medium for creation of content. Survey widgets can be used to assess your understanding of the material. An aggregated survey widget can be the basis of an essential evaluation tool.
5.2 Role of IT
The role of IT in this case is to conform to the limitations of the new innovations. IT needs to get its infrastructure ready for Big Data, Cloud based infrastructure such as offered by Amazon, Virtualized environments.
A simple business use case scenario is based on an actor who needs to play a video game all day. Said user gets up in the morning, switches on the TV, and logs in to access the game. It’s time to head to work so he picks up the mobile device and resumes the same session on a mobile platform. He gets to work and logs in to his computing device and again picks up the same session he started at home. For an enterprise the maturity of a company’s offer may be evaluated by its ability to leverage existing application infrastructure.